A New Take on Giving

By Romesh Ratnesar

Steve Kirsch is the first to admit it. He is too damn rich. "I can't spend all my money," he sighs. "The best things in life just aren't that expensive." At 41, the founder of the Internet search-service Infoseek is worth more than $137 million. But while many of the other fresh-faced moguls in Silicon Valley have plowed their outrageous fortunes into still more outrageous indulgences, Kirsch decided in 1992 to do something subversive: he created his own charitable fund.

So far he has dumped more than $10 million into it and plans to increase the fund's size to $50 million by 2000. Local libraries, environmental groups and his alma mater, M.I.T., have benefited handsomely; but Kirsch directs the bulk of his charity to scientists seeking cures for diseases that touch him. Kirsch's father is a diabetic who was recently found to have cancer; his mother suffers from macular degeneration. "Someday I could have to go through what my parents are. So if I can apply my dollars now, then when I'm older, it's possible I can have a better quality of life," he says. "People don't realize that you can have a giving program that is totally selfish."

Kirsch is bucking a bigger trend. In this era of plenty, Americans haven't spread the wealth too far: the percentage of households making charitable contributions has remained unchanged since 1987, and those who do give actually donate a smaller slice of their income (1.6%) than Americans did 30 years ago (2.1%). In dollar terms, though, last year individuals gave a record $109 billion to charity, up $20 billion over 1992.

In large part the growth is due to resurgent generosity among the ultrarich, whose pockets have fattened the most during the decade's boom. A survey released last month by U.S. Trust found that the wealthiest 1% of Americans say they gave away an average of 8% of their after-tax income in 1997, up from 5% in 1993. Says Paul Schervish, a philanthropy expert at Boston College: "A sleeping giant is awakening."

The end of the slumber comes two years after Ted Turner hectored his fellow billionaires to stop hoarding their market-inflated wealth. Last fall Turner (who is vice chairman of Time Warner, TIME's parent company) pledged $1 billion of his now $6 billion fortune to the United Nations in the form of an annual pledge of $100 million in Time Warner stock. He may have started something. The world's richest man, Bill Gates, long derided for being too penurious, has put $2 billion into his two charitable foundations. Earlier this month he donated $100 million in cash toward vaccinating children in the developing world. It was just one of numerous conspicuous gifts made in 1998. Among them: Armenian-American billionaire financier Kirk Kerkorian's $200 million in aid to earthquake-ravaged Armenia, and businessmen Ted Forstmann and John Walton's $100 million fund to subsidize private-school scholarships for inner-city students.

Aside from their headline-grabbing size, those gifts reflect changes in the character and aims of big-money philanthropy. While there are still benefactors who hand wads of money to nonprofit institutions to disburse as they wish, today's philanthropists are more likely to approach charity with the same hands-on management they bring to their businesses and stock portfolios. Says H. Peter Karoff, head of the Philanthropic Initiative, a consulting firm that helps wealthy clients donate like investors: "The hard look at the management of charitable groups, the scrutiny of how an organization makes an impact--all those things you do every day as a stock picker work very well in philanthropy."

Take Gates' vaccine initiative. It came after months of research into existing immunization programs and meetings with world-health experts, including one gab session at his Medina, Wash., home a few weeks before the gift's unveiling. The cause appealed to him in part because it promised rapid, tangible returns. "The science is proved--it's just a question of driving equal access," says Gates. "It might take 15 years for that to happen. But through this program it can be cut down to as little as five years--and there are millions of lives at stake in the difference."

Giving away a lot of money isn't that easy. "Every one of us is going to give the money away at some point," says Bill Davidow, a venerable Silicon Valley philanthropist and multimillionaire, "but some of us just haven't chosen to part with it yet." Some charitable foundations and organizations, he says, haven't learned ways to make folks feel good about giving away their money: "My wife and I, for example, contribute to a wonderful organization that has one of the most disorganized development groups I have ever seen."

Today's givers match their money with their energy. Forstmann, who is chairman of Gulfstream Aerospace and a senior partner at a New York LBO firm he co-founded, spent a year canvassing the country, examining local school districts--the program will serve 40,000 students in 38 cities--and cajoling everyone from Michael Ovitz to Barbara Bush to join the fund's board of advisers. He got the idea for the venture after years of studying a similar financial-aid program in New York City. Nine out of 10 school kids who used money from the fund to attend private schools, he says, went on to college.

Many new philanthropists bypass traditional charitable vehicles and instead channel money to favored causes through their own start-up foundations. The number of grantmaking foundations in the U.S. has climbed to more than 40,000, double what it was in 1980.

Meanwhile, as philanthropy becomes more strategic, the old human-services standbys--like hospitals, homeless shelters and soup kitchens--have had to scramble for support. The Jenjo Foundation, created and run by actor Alan Alda's family, focuses specifically on nonprofits that work with poor women and children. "We tend to fund organizations that will help people get on their feet," says Elizabeth Alda O'Heaney, 38, the family's second daughter, "rather than just give someone a handout for a meal." The family visits prospective grantee's sites, closely vets budgets and interviews local community members. Says O'Heaney: "Whether we're giving away $20,000 or $1,000, we have to make sure every dollar counts."

The spirit of entrepreneurship has inspired some specialized objects of philanthropic attention. Katrina Garnett, CEO of Crossworlds Software in Burlingame, Calif., and one of the high-tech world's few female chief executives, launched a foundation last year devoted to encouraging high school girls to pursue computer science. Kirsch, meanwhile, plans to pump $100,000 a year into identifying all asteroids hurtling too close to earth. "There are very few things people can do to save the world," he says. "This is one of them."

Alas, not everyone has ambitions so grandiose. In Silicon Valley, 25% of the area's wealthiest people give away less than $2,000 a year. And the spike in giving among the most affluent Americans is at least a little deceiving. The 8% of after-tax income that the superrich give away is still puny compared with their total wealth.

The rest of us have some work to do too. Three out of 10 American households will have donated absolutely nothing to charity by year's end. "Giving is the greatest thing one can do--it's the core of the human condition," says Forstmann. "Therefore, no one ever gives enough."

--With reporting by Janice Maloney/San Francisco

With reporting by Janice Maloney/San Francisco